While the channel continues to fume about the forthcoming elimination of internal use rights to Microsoft software, some partners are raising concerns over pending changes to small and midmarket cloud solutions competency requirements that mandate the activation of a minimum number of new accounts to retain program status.

The Lowdown: The recently announced changes put more pressure on Microsoft small and midmarket resellers to activate more “new” cloud accounts. Starting in October, Silver partners must activate at least 10 new Office 365 accounts in a 12-month period to retain their cloud solutions competency status. Gold partners face a steeper goal of 50 new accounts.

The Details: In the update notice, Microsoft defines new accounts as a customer “that starts a new cloud subscription for the first time with Microsoft within the previous 12 months. Existing customers that are not retained by the partner will count against the new customer calculation regardless of when the customer subscription start date began.”

The Impact: The program requirement changes will put a tremendous amount of pressure on smaller Microsoft partners, which historically struggle with sales. According to the 2018 U.S. State of the Cloud Channel report — a research project by The 2112 Group, Ingram Micro Cloud, and Microsoft – 56% of partners do not have sales plans or goals, and 73% do not have sales goals for cloud products. The report found that the average partner has 63 cloud accounts. And while the average partner is adding 1 to 10 new cloud customers per month, they’re losing existing accounts at nearly equal rates.

Background: The increased emphasis on Office 365 sales is no surprise given Microsoft’s continued shift to cloud-based products sold through recurring revenue models. The Office productivity suite is one of the most successful applications ever sold with more than 1.2 billion licenses in use. Office 365 is the leading cloud-based productivity suite, but it only constitutes 10% of the overall Office installed base. Microsoft is continuing to decrease the appeal and benefits that come with the traditional Office license to make Office 365 adoption more appealing.

Partners continue to fume over the recently announced elimination of internal use rights (IUR) to Microsoft applications. Beginning in October, Microsoft Gold and Silver partners will no longer have access to complimentary Microsoft licenses for internal use. The change is causing many partners to rethink their alignment with Microsoft and their investments in Gold and Silver competencies. Some partners say losing access to Microsoft licenses is a disincentive to evangelizing products to customers.